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Companies are striving to make their fleet drivers as cost- and safety-conscious as possible.
Jeffrey Zygmont, CFO Magazine
November 1, 1997
Susan Miller will never forget what was arguably the most flagrant misuse of a company car ever. Fifteen years ago, when she was cutting her teeth in fleet administration for a former employer, a worker there decided that his black Chevrolet Caprice looked enough like an unmarked cruiser to support his impersonation of a police officer. He used the ploy to pull over female drivers--with evil intent.
"When they caught him and impounded the vehicle, it was a huge embarrassment, and they had to keep the car for about a year as evidence," says Miller, who today is domestic fleet manager for McDonald's Corp., in Oak Brook, Illinois.
But even when driver behavior is perfectly respectable, human idiosyncrasies remain a big challenge for fleet managers. They can be costly, too, and not just because they consume management re-sources. Petty pilferage, unauthorized fuel purchases, neglect of automobiles, and low driver productivity can add significant costs, in addition to some hidden penalties, to corporate fleet operations.
Moreover, accidents involving fleet vehicles can represent a significant exposure. Each year, about one in four fleet vehicles is involved in an accident, says Rich Neff, senior vice president, product management, North America, for GE Capital Fleet Services, a Minneapolis-based fleet leasing and services company. The average cost of the damage: $1,400. But that cost may be dwarfed by indirect costs---insurance premiums, medical bills, workers' compensation, lost productivity, even jury verdicts.
For these reasons, a number of companies are trying to remove from drivers as much of the burden of operating a corporate car as possible-- from buying gas to report-ing travel costs to handling accidents. At the same time, these companies seek to monitor the habits of drivers and forestall fraud--say, from using cars for personal reasons or from making illicit fuel purchases. And, increasingly, they are teaching their employees to become safe and responsible drivers.
Mallinckrodt Inc., a St. Louisbased manufacturer of chemicals and health care products, now saves an estimated $40,000 annually from its 750-vehicle fleet, just by better enforcing fuel policies. "We eliminated all premium fuel purchases and the use of full service," says Sam Visintine, formerly assistant treasurer, now a financial services process leader for Mallinckrodt.
The company also curtailed hidden incidental purchases of such items as cigarettes and chewing gum, which used to be easily attached to a gasoline charge. Its method: a fuel-card program that collects and reports the information that Mallinckrodt needs to spot abuses. "It lets us monitor the type of fuel and the amount of fuel drivers buy," notes Visintine.
Although their popularity is growing, fuel cards are currently used by fewer than a quarter of U.S. business fleets, estimates Mike Dubyak, senior vice president of Wright Express Corp., in Portland, Maine. Wright is the leading provider of fuel-management services, through its Wright Express Card program and through private-label and co- branded cards offered through oil and fleet- service companies. Generally, such fuel- management programs yield im-mediate savings. Nationwide Insurance Enterprise, based in Columbus, Ohio, saw a dramatic drop in premium fuel purchases within six months of its adoption of a fuel-card program. And when McDonald's moved to the Wright Express Card last April, it discovered that 23 percent of its drivers were buying premium gasoline, compared with the national average of 3 percent. "We've already seen a savings," beams Miller.
The card system captures data that identify drivers who violate company policies. To buy gas, a driver must run his fuel card through a point-of-sale terminal, enter a personal driver ID number, and enter the odometer reading of his car and other information. The procedure supplies Wright electronically with the time, date, and place of purchase; the fuel type and amount; and, with some calculations, the car's miles per gallon. (A car registering pitifully low MPG suggests that a driver may be fraudulently fueling a second vehicle.) Wright packages this information monthly, sending its fleets detailed reports of every driver's purchases, with an exception section that highlights purchases and purchase patterns that exceed normal expectations or violate corporate policy.
The cost of Wright's program: $2 per month for each fuel card.
SOLVING PROBLEM DRIVERS
Fuel cards are one of a handful of tools offered by fleet-management vendors that help companies control their drivers. Maintenance management programs that provide coupons for drivers to redeem at regular intervals for preventive care pay off at resale time: better- maintained autos generally fetch a better price. Motor vehicle record checks--especially for employees just entering a fleet program-- can garage problem drivers before they take the wheel of a company car. Safety and accident-prevention programs can hedge the odds that existing problem drivers will avoid accidents.
"A classic problem is where you have a person who's an outstanding service rep, or a salesperson who's an outstanding sales performer, and you want to keep him but he's a terrible driver," says Neff. GE Capital and other fleet-leasing and -service companies provide accident-prevention programs that focus on driver training.
For Mallinckrodt, safety is a particular concern regarding the more than 150 delivery drivers in its nuclear medicine business. They use company-owned minivans and economy cars to shuttle radio pharmaceuticals to hospitals in major metropolitan areas. Because these are lower-level jobs, Mallinckrodt can't count on the same standards of behavior it gets from the salespeople who drive the balance of its fleet vehicles.
Its remedy: "We go out and find someone who can actually drive a car," says Visintine. "As a result, we've seen tremendous reductions in our accidents and our costs." The process starts with a records check of an applicant's driving history. Next, a manager at the point of hire rides with an applicant to observe driving habits. Finally, the company runs delivery people through a training program, using instructional videos and other materials.
"It's hard to quantify the savings, but my gut feeling is that there have been a lot of improvements since the implementation of our training program," says Visintine.
Providers of these and other driver-oriented programs insist that the paybacks are measurable and significant. "We have cost/benefit models for all of our programs," says Neff. "For example, our maintenance management program has a fee per month, but we can show fleets how much we save above that."
No matter what the program, in the end, effective driver management gets down to sensible and well-enforced policies. When Minneapolis-based Honeywell switched its 5,200- vehicle U.S. fleet from a reimbursement system to the GE/Wright fuel-card program on January 1, it continued to repay drivers directly for off-card fuel purchases for only about two months. "When you take away their reimbursement document, drivers automatically conform to the system very quickly," says Tom Seuntjens, a member of Honeywell's treasury management team. "If you leave crutches, many drivers will not want to go to the new system."
In addition to a maintenance management program--through Wheels Inc., headquartered in Des Plaines, Illinois--Nationwide Insurance Enterprise, in Columbus, Ohio, gives drivers a personal incentive to keep cars in good repair. The company aggressively encourages its more than 5,000 fleet drivers to purchase the cars at the end of their company service, tempting them largely with price. "We don't sell a car for anything more than what we could get for it at an auction. That's recognized by the drivers," says Gail Royer, corporate fleet administrator. It also helps that the cars are well appointed. "With the equipment we put on, they're very nice vehicles," she notes.
Accordingly, of the 1,200 sedans it retires each year, Nationwide sells about 40 percent to their drivers, Royer estimates.
A WHACK ON THE HEAD
Hartford-based Aetna Inc. uses a financial incentive to encourage accident prevention. The company's Safety and Environmental Unit examines each accident involving one of Aetna's 1,800 cars, to determine if Aetna's driver could have prevented the crash. An accident may be deemed preventable even if the driver is not legally at fault.
"To give them a little whack on the head, drivers are assessed a $200 penalty if they are charged with a preventable accident," explains fleet manager Kathy Egan. That tallies to about 34 percent of mishaps, she says.
Aetna's service provider, U.S. Fleet Leasing, of San Mateo, California, also conducts motor vehicle record checks (per Aetna) of every driver in line for a company car. Anyone with a questionable record is subject to review; about 2 percent get turned down. But Egan speculates that most questionable drivers don't even apply for a fleet car, because the policy is so well publicized throughout Aetna.
Indeed, good communication surfaces again and again as an effective method of getting drivers to comply with company policies. Before McDonald's adopted accident and maintenance management services from Consolidated Services Corp., in Elk Grove Village, Illinois, last April, it ran a seven- month pilot program covering 800 of the company's 3,200 cars. Susan Miller explains that her main motive for the pilot was to gauge driver reaction, enabling her to fine- tune the message she would take to the balance of the fleet.
"When you're rolling out something of this magnitude, you should start slowly," she cautions. "The challenge is to put it across so that it doesn't sound like it's coming from Big Brother." It helps to have a well- established rapport with drivers. "I treat my drivers as my customers in my communications," Miller says. "We've learned that the more information they have, the better."
Of course, no amount of sound management will curtail the occasional lapses that are best attributed to human idiosyncrasies. Police once called Nationwide's Gail Royer about a company car parked at the Phoenix airport. The strong odor from the trunk had convinced the officers that a body was inside. "I spent most of the day trying to locate the driver," recalls Royer, before police finally forced open the trunk. "All they found was his gym bag, filled with sweaty clothes."